The changing face of commercial property
With the level of demand for commercial property generally reflecting the health of different sections in the economy, it is not difficult to see that prime city centre retailing is in the doldrums, with footfall in Belfast City centre down 19.1 per cent in August, which is ahead of the decline in the rest of the UK where falls were on average at 18 per cent.
Accordingly, it is easy to see why we welcome the High Street Voucher Scheme, which Economy Minister Gordon Lyons announced recently, with the objective of boosting local businesses. The £100 per head for the over 18s will be a welcome shot in the arm for the high street.
Whilst the high street has suffered, one area of retailing that has benefited more than most is the drive-thru sector. Demand has surged for quick service solutions where the customer does not have to leave the safety of their car. The queues at your local McDonalds are testament to this.
However, the drive-thru market is no longer just the preserve of operators such as McDonalds and KFC, with active requirements throughout NI from the likes of Costa, Starbucks, Greggs and Tim Hortons all vying for a slice of this lucrative sector of the retail market.
There is considerable room for continued growth in this sector of the market, however, with many of the sites now occupied it will take innovative thinking on behalf of operators, developers and planners to keep the supply of opportunities going.
Activity in the warehousing sector is also continuing at pace, with demand for leasing and buying outstripping supply. The supply has traditionally been made up of second-hand space, which had previously been used for manufacturing or was specifically built for a business that no longer requires it.
With this traditional supply diminishing and rents rising, we will start to see some speculative warehousing being built with the emphasis on height and therefore volume for storage and distribution.
We anticipate rents achievable in this sector to far exceed those for the traditional warehouse market. A notable entrant in this market is Amazon who having only just taken occupation of their 400,000 sq ft distribution centre in Belfast last year and have now revealed plans for a new 70,000 sq ft facility in Mahon Industrial Estate in Portadown, with a further requirement on the cards for the north west.
Our general outlook for the commercial property market going forward is much more positive than it was this time last year when we were in the middle of lockdown. Transactions had ground to a halt and there was complete uncertainty over the job market, combined with Brexit.
Even with the end of the furlough scheme fast approaching, it is heartening to see new HMRC payroll data suggesting that the Northern Ireland job market continued to recover in August, with employment levels in Northern Ireland 1.5 per cent above pre-pandemic levels.
Although a word of caution as there were still approximately 36,000 on furlough at the end of July and not all of these people will be fully employed once the furlough scheme comes to an end at the end of September.